This decision provides useful guidance on incorporation of standard form contractual terms, in this case a Himalaya clause and exclusive jurisdiction agreement into a contract of carriage. It confirms that these typical terms found on the reverse of a bill of lading are neither onerous nor unusual and that there is no obligation on the carrier to draw the shipper’s attention specifically to such terms prior to the carriage.
The background facts
The dispute arose out of contracts of carriage for the shipment of 150 containers of madeira wood (the Cargo) from Guinea-Bissau to Huangpu, China between the Second Claimant (Maersk A/S) and the Defendant (Almar-Hum). The contracts were agreed in December 2018 when Almar-Hum made bookings via the Maersk A/S online system. The contracts were evidenced by 13 bills of lading which were issued, on behalf of Maersk A/S, by the First Claimant, Maersk Guinea-Bissau (Maersk GB).
The bills of lading were not finalised before the Cargo’s arrival in China in March 2019 because Maersk A/S did not receive Almar-Hum’s final bill of lading approval in respect of any of the bookings made and so the original bills could not be printed.
The 13 bills of lading were in due course, however, issued under unusual circumstances. Very briefly, outstanding monetary disputes between Almar-Hum and certain Guinea-Bissau authorities resulted in those authorities seeking possession of the bills of lading and exerting pressure on Maersk GB to give up the bills. Following certain threats, Maersk GB printed and surrendered the bills of lading to the authorities during February and March 2019.
The authorities retained the bills of lading until June 2019 when a third party discharged Almar-Hum’s debt in exchange for the bills of lading being released to allow the consignees to take delivery of the Cargo.
Almar-Hum subsequently commenced court proceedings in Guinea-Bissau against Maersk GB and others (but not Maersk A/S). Maersk GB filed a Statement of Defence because it would otherwise be deemed to accept Almar-Hum’s allegations. However, it also challenged jurisdiction. Nevertheless, the Court found all the defendants jointly and severally liable for a claim amount of over US$10 million.
The Claimants commenced English Court proceedings seeking damages and/or an indemnity from Almar-Hum in relation to its alleged breaches of the exclusive jurisdiction clause and the Himalaya clause that the Claimants maintained were incorporated into the contracts of carriage.
The bill of lading terms
The relevant terms of the contracts of carriage were referenced in a rate sheet table provided to Almar-Hum by Maersk in October 2018 and also in the subsequent online application process.
They were also set out in the draft bills of lading provided to Almar-Hum, prior to shipment, as part of the process which would normally result in the original bills being issued. Additionally, they were included in the bills of lading that were eventually issued and which ultimately became available to Almar-Hum and its consignees.
Clause 4 was the “Sub Contracting” clause, entitling the carrier to sub contract the whole or part of the carriage. Otherwise known as a Himalaya clause, such a provision generally prevents a claim being brought against third parties including the carrier’s servants, agents and subcontractors. Furthermore, it extends the carrier’s rights and defences available under the contract of carriage to such third parties. Clause 4.2 expressly stated that such third parties were entitled to enforce any jurisdiction provision contained in clause 26 against the merchant.
Clause 26 was the English jurisdiction clause (EJC) which, in relevant part, provided for English law and the exclusive jurisdiction of the English Court but permitted the carrier, at its sole option, to commence proceedings against the merchant at a competent court of a place of business of the merchant.
The Claimants argued that these provisions, which formed part of Maersk A/S’ standard terms, were incorporated into the contract of carriage between Almar-Hum and Maersk A/S, and that Maersk GB could rely on these provisions because it was a third party within the scope of the Himalaya clause.
Almar-Hum contended that the standard terms and these two clauses in particular, were onerous because they significantly reduced Almar-Hum’s rights. Therefore, they could not be validly incorporated into the contracts of carriage if they had not been specifically brought to Almar-Hum’s attention. Almar-Hum argued that these provisions should have been specifically “signposted” by Maersk A/S before the Cargo was shipped.
In addition, as Maersk GB was not a party to the contracts, Almar-Hum said it could not rely on these clauses.
The Commercial Court decision
The Court dismissed the argument that the entirety of the standard terms was onerous. There was no authority holding that the entire terms of a bill of lading were not binding because they were allegedly unusual or onerous. Furthermore, Almar-Hum had previously done business with Maersk A/S and would have accepted the standard terms as part of the booking process.
Furthermore, neither the Himalaya clause nor the EJC could be regarded as either onerous or unusual. Himalaya clauses have been a feature of bills of lading for a very long time. They are far from unusual and any well-drafted bill of lading will include one. From the cargo-owner’s perspective, they are not onerous. Their essential purpose is to ensure that the terms on which the carrier has agreed to carry the goods cannot be circumvented; for example, by claims in tort being made by a bill of lading holder against third parties, with the carrier then having to meet the liability of that third party.
It is also common for well-drafted bills of lading to include a jurisdiction clause. A requirement to sue in a neutral jurisdiction, in this case England, was not onerous for a party engaging in international trade. In any event, the EJC was clearly brought to Almar-Hum’s attention in the rate sheet.
Maersk A/S was, therefore, entitled to rely on both provisions as against Almar-Hum. As to the position of Maersk GB, the wording of clause 4 was very broad. Construing the clause as a whole, Maersk A/S was contracting not only as contractual carrier, but also on behalf of its subcontractors through whom it would perform some of its obligations in relation to the shipment and carriage.
Furthermore, as the two companies were Maersk entities and there was a regular course of dealing involving Maersk A/S using the services of Maersk GB in running operations on the ground in Guinea Bissau, there could be no dispute that Maersk A/S was authorised to contract on behalf of Maersk GB.
The Court added that Maersk GB could enforce the Himalaya clause not only under common law but also pursuant to section 1 of the Contracts (Rights of Third Parties) Act 1999 which entitles a third party, in certain circumstances, to enforce a contractual term. However, only the exclusion and limitation provisions contained in the bill of lading were enforceable by Maersk GB under the 1999 Act.
As regards the EJC, while there was authority indicating that a third party’s right to enforce a Himalaya clause did not extend to the enforcement of a contractual jurisdiction clause, the present case could be distinguished because the Himalaya clause expressly entitled Maersk GB to rely on clause 26. Therefore, it should be entitled to enforce the EJC not only by way of a defence but also for a claim for damages for breach of the clause.
Comment
The decision confirms that the Court will take a commercial and pragmatic approach to the question whether standard terms have been incorporated into a contract, particularly where there is an established course of dealing between the parties.
It also demonstrates that the English Court will not allow parties to an exclusive English jurisdiction clause to breach such a provision without repercussions. However, a Himalaya clause should expressly reference an EJC if it is intended that a third party should be able to rely on it.
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